Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Friday, September 09, 2005

In the aftermath of Katrina...
indicators and contra-indicators

Mainstream Wall Street forecasters have looked like clowns before, but given the current atmosphere of economic denial, they seem more than usually foolish now.
That's the tagline of this article in MoneyWeek. [h/t to Sean]

Another quote from the article:

Michael Santoli for Barron's Magazine rather uncritically reports that, as always: "the designated market forecasters at the major brokerage firms are leaning as a group toward the bullish end of the boat. Their collective wisdom holds that the U.S. stock market can climb from 5% to 10% in the final four months of the year."

The less charitably inclined would hold that
a) Wall Street forecasters consistently amount to a herd chanting "Buy stocks"; that
b) both individual and institutional investors increasingly ignore this message on account of its inevitable banality; that
c) market forecasting is an essentially worthless occupation, and that
d) this message's essential triteness is thrown into starker relief during a time of acute national crisis in which the implications for economic growth or corporate profits are hardly unequivocally supportive.

Santoli does, fairly, point out that these same analysts have been "consistently erroneous" in their predictions of long-term interest rates above 5% - perhaps Wall Street forecasters do serve a purpose after all, as fairly reliable contra-indicators.

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